Relief over debt deal still powering US markets

While there was little fresh news to provide support, relief about the US fiscal agreement continued to permeate sentiment.

Expectations the Fed will wait longer to begin tapering Quantitative Easing (QE) were supportive for stocks, as was economic data from China on Friday.

The Dow rose 0.2% and the Nasdaq jumped 1.3% for the session, with shares for Google Inc grabbing headlines as they rose above US$1000.

The S&P500 rose 0.7% to close at a new record high.

Bonds:

US government bond prices continued to edge higher (yields slipped) on Friday night, although the move was less pronounced than in the previous sessions.

US 10-year Treasury bond yields fell another 1bp to 2.58%, for a cumulative decline of 18 basis points since the fiscal agreement was reached, as the previously built in risk-premium continued to unwind.

Australian 3-year government bond yields (implied by futures) fell in the London session, but then rebounded to finish down just 1 basis point at 3.10%.

Foreign Exchange:

Improved risk appetites helped the Aussie dollar strengthen against the major currencies.

The Aussie dollar gained ground against the US dollar, hitting a four-month high of 0.9678 US dollars following the release of solid economic growth data from China.

The US dollar weakened against the other major currencies, with the US dollar index, which measures the US dollar's value against a basket of currencies, falling to its lowest since February as investors pushed out expectations of QE tapering by the Fed and amid concerns about the impact of the government's two-week shutdown on the US economy.

The Euro strengthened further versus the US dollar, with the EUR/USD hitting an eight-and-a-half month high of 1.3704.

Commodities:

The gold price increased further on Friday night, with expectations the Fed will wait longer to begin tapering QE, boosting the gold price.

Australia:

There was no key data in Australia on Friday.

China:

Real GDP expanded by 7.8% in the September quarter, in line with consensus estimates. It was a slight rise from the 7.7% annual pace recorded in Q2.

China's growth recovery will likely continue to unfold in the coming quarters.

The month of September indicators came in slightly under or on market forecasts.

Industrial production met consensus at 10.2% in the year to September (from 10.4% in the year to August) while fixed investment shed 0.1ppts from the 20.3% year-to-date rate of the previous update, against expectations of a steady outcome.

Retail volumes were softer; nominal sales slowed by 0.2ppt in year-ended terms despite a 0.5ppt uplift in the CPI.